What is a trial balance?

Definition

A Trial Balance is a listing of every ledger account and its debit or credit balance at a point in time. It is a proof, not a financial statement, used to check that total debits equal total credits before you trust the reports.

In books language, this is a worksheet pulled from the general ledger. If the two columns do not match, something posted out of balance, and the statements should wait.

Where it shows up

Balance Sheet: Related to proving asset, liability, and equity accounts still balance.

P&L: Related to proving income and expense accounts still balance.

Cash flow: Related to nothing extra.

See also: General Ledger · Adjusted Trial Balance · Month-End Close

You will not find the Trial Balance as a page in the issued statements. It is an internal listing you print from the ledger to prove the books still balance.

The listing includes Balance Sheet accounts such as cash, accounts receivable, and accounts payable, and it includes P&L accounts such as revenue and expenses. A high total on both sides is not a problem by itself; the question is whether the two sides are equal.

The Statement of Cash Flows is not built from the Trial Balance as a separate cash listing. Cash is just one account on the Trial Balance, and it should agree with the bank once you reconcile.

How it works

Every posting that hits the ledger updates an account balance. The Trial Balance lists those balances, one line per account, with the amount in a debit column or a credit column.

Asset and expense accounts normally show debit balances. Liability, equity, and revenue accounts normally show credit balances.

You add each column. If the totals match, the ledger is in balance, and if they do not, a posting is missing a side, a number was keyed twice, or an account was left off the list.

A Trial Balance that equals does not prove the books are correct. A bill posted to the wrong expense still balances, because equality only proves that every debit had a credit of the same amount.

Bookkeepers often print a Trial Balance after the last invoice of the month, and again after adjustments. The first listing is sometimes called unadjusted, and the later listing, after period-end adjustments, is the Adjusted Trial Balance.

Order on the page usually follows the chart of accounts: current assets, current liabilities, other Balance Sheet accounts, then income and expenses. That order makes it easier to draft the Balance Sheet and Income Statement from the same listing.

Accounts with a zero balance may be omitted, depending on the software. Either way, the two column totals still have to match, or the listing is not ready to support statements.

Example

A florist prints a Trial Balance after the last cafe invoice of the month. Cash, supplies, accounts receivable, accounts payable, revenue, and wage expense each show a balance, and the debit column total equals the credit column total.

That equal listing is the proof the florist needs before drafting statements. If the columns had not matched, the florist would hunt for a posting that hit only one account before going any further.

Common mix-ups

A Trial Balance is not a Balance Sheet. The Balance Sheet reports assets, liabilities, and equity in a classified format for readers, and the Trial Balance is a raw listing of every account, including income and expense, used inside the close.

A Trial Balance is not an Adjusted Trial Balance. The first listing is taken before period-end adjustments, and the adjusted listing is the same report after those adjustments are posted.

Equal columns do not mean the statements are ready. They mean the ledger is in balance, and you still need cutoff, reconciliations, and any missing accruals before you issue reports.

Related terms

• General Ledger: The master record of every account and every posted transaction.
• Adjusted Trial Balance: The trial balance after all period-end adjusting entries are posted.
• Debit: The left side of an entry, which increases assets and expenses.
• Credit: The right side of an entry, which increases liabilities, equity, and revenue.
• Chart Of Accounts: The organized list of every account used to record transactions.
• Posting: Recording a journal entry into the general ledger accounts.
• Month-End Close: The monthly version of the close, ending in issued financial statements.
• Balance Sheet Reconciliation: Reconciling every balance-sheet account as part of the close.